All my adult life I've assumed that Social Security functions just as FDR wanted it to function--in a word, as a giant Ponzi scheme. As a recent piece by Robert Samuelson demonstrates, I was simply mistaken:
When Roosevelt proposed Social Security in 1935, he envisioned a contributory pension plan. Workers’ payroll taxes (“contributions”) would be saved and used to pay their retirement benefits. Initially, before workers had time to pay into the system, there would be temporary subsidies. But Roosevelt rejected Social Security as a “pay-as-you-go” system that channeled the taxes of today’s workers to pay today’s retirees. That, he believed, would saddle future generations with huge debts — or higher taxes — as the number of retirees expanded.
Discovering that the original draft wasn’t a contributory pension, Roosevelt ordered it rewritten and complained to Frances Perkins, his labor secretary: “This is the same old dole under another name. It is almost dishonest to build up an accumulated deficit for the Congress . . . to meet.”
But Roosevelt’s vision didn’t prevail. In the 1940s and early 1950s, Congress gradually switched Social Security to a pay-as-you-go system. Interestingly, a coalition of liberals and conservatives pushed the change. Liberals wanted higher benefits, which — with few retirees then — existing taxes could support. Conservatives disliked the huge surpluses the government would accumulate under a contributory plan....
Millions of Americans believe (falsely) that their payroll taxes have been segregated to pay for their benefits and that, therefore, they “earned” these benefits. To reduce them would be to take something that is rightfully theirs. Indeed, Roosevelt — believing he had created a contributory program — said exactly that:
“We put those payroll contributions there so as to give the contributors a legal, moral and political right to collect their pensions. . . . No damn politician can ever scrap my Social Security program.”
But of course the damn politicians did scrap the contributory program--a historical fact (I see, now that I'm at last aware of it) of immense importance. Barack Obama, Nancy Pelosi, Harry Reid, and the whole Democratic leadership that insists the present Social Security system should be treated as sacrosanct and untouchable--every last one of them is betraying the legacy, properly understood, of FDR.
Which brings me to one final request for forgiveness.
President Reagan used to say that he wasn't opposed to the New Deal but to the Great Society. I never quite bought that, assuming the Gipper was permitting nostalgia for FDR to get the better of him. But Reagan seems to have understood the New Deal--again, as properly understood--better than did his young speechwriter. FDR, Ronald Reagan, can you both forgive me?